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Iraqi PM: No More Oilfields for Foreign Companies

Source: Reuters 2/20/2010, Location: Middle East

Iraq has no further plans to use foreign firms to develop its oilfields beyond ones auctioned off last year, the country's prime minister said, ahead of a national election next month.

Analysts say that foreign companies may have accepted the tough terms in oilfield development contracts awarded in two rounds last year partly to secure an initial foothold in Iraq, with a view to possible access to other untapped reserves later.

Iraq has the world's third-largest crude reserves and is the world's 11th-biggest oil producer.

Prime Minister Nuri al-Maliki said Iraq should start thinking about developing its national oil firms and warned of "staying captive in the hands of foreign oil firms."

"I told the oil minister during a cabinet meeting that we will never sign any more contracts with foreign oil companies," Maliki told supporters at a rally in the southern oil hub of Basra, weeks before a parliamentary election on March 7.

"We will depend on our national companies in developing our oilfields," Maliki said.

His nationalistic tone could discomfort oil firms such as BP Plc and Royal Dutch Shell, which are monitoring their likely reception in a country wracked by years of war and with little recent experience of working with foreign companies.

Baghdad has struck deals with international oil firms that could boost its output capacity to 12 million barrels per day (bpd) within seven years from about 2.5 million bpd now.

Oil Minister Hussain al-Shahristani said in December there were no plans for a third oil contract auction.

Maliki's coalition is not expected to repeat its triumphant performance in last year's local polls. Huge bombings have since chipped away at his claims to have improved security, and opponents have united to oust him.

Analysts expect the ten oil deals awarded in auctions last year will likely survive the change in Iraq's government after the parliamentary vote next month, seen as a crucial test for Iraq as it tries to move away from years of war and sanctions.

Foreign capital and expertise is seen as essential if Iraq is to rebuild its battered economy and infrastructure.

The country's oil installations and pipelines have suffered repeated bombings and sabotage, and many of its most qualified workers fled the country in the violent and chaotic aftermath of the 2003 U.S.-led invasion.

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